by Jim Boyle and Joni Astrup
Star News staff
The city-owned Pinewood Golf Course will not be opening this spring.
The Elk River City Council made that decision by consensus in a work session March 17.
It came after the City Council met in a closed session with legal counsel. The city is currently in litigation regarding the purchase of the nine-hole course, at 18150 Waco St.
Mayor John Dietz said based on what the council heard in the closed meeting, he thinks it’s best to not open Pinewood this year.
City Administrator Cal Portner said later that his goal all along was to continue to operate Pinewood as normal throughout the litigation. But he said there have been some new developments recently. The two sides met in mediation on Feb. 28. The mediation is still open; a jury trial is set for Sept. 22.
With the decision not to open this spring, Portner said the city will maintain Pinewood, but the grass will be left longer and the course will not be playable.
If the litigation is resolved this summer, he said the course could be put back in playable condition in a week or two and reopen.
Portner doesn’t anticipate any layoffs due to the decision not to open the course this spring. Pinewood’s superintendent is the city’s only full-time employee associated with the golf course. The golf course superintendent already works in parks maintenance in the golf off season; Portner said they still need someone to maintain the course even if it is closed and there is other street and parks seasonal work that needs to be done this summer.
What happens to the golf course in 2015 remains to be determined.
The city purchased the golf course in 2006 after a developer considered building homes on it.
The golf course has averaged $82,000 in annual losses, which does not include the annual lease or contract for deed interest payments, according to Sherburne County 10th District Court documents.
Pinewood Golf Course was projected to sell 20,000 rounds of golf annually when the city acquired it, but that never happened. The most it has sold in a year is about 14,000 rounds, Portner said.
The city also found out after the deal was cut that it could not have concessions to generate revenue because the clubhouse was not set up with a kitchen.
City officials estimate it would cost between $1 to $2 million to replace the clubhouse with a more functional one, but once it opened the operation would continue to lose money, city officials predicted.
All things might have seemed possible when the economy was clipping along, but when park dedication fees dried up, everything has taken on a different look, Portner said. The city administrator said even the plats the city has had this past year were all done in 2006 and 2007.
The Elk River City Council and city staff decided when the final $1.4 million balloon payment came due on April 6, 2013, it could not keep taking such losses. That’s when they asked Paul Krause to renegotiate the deal but he wasn’t interested.
City officials were advised by legal counsel they had another option and that was to turn the property back over to the Krauses. They decided not to make the $1.4 million balloon payment on the five-year contract for deed relating the purchase of Pinewood. Under their plan, Krause and his wife, Pamela, would take back ownership of the 27-acre parcel and retain more than $900,000 in cash payments the city had made. The city’s contention was that it performed on the purchase agreement once it entered a contract for deed.
Portner said the city acknowledges that it didn’t complete the contract for deed but that the remedy is to return the property. This option is available to protect cities from encumbering future debt, he said.
“It’s my job to protect the interests of the city, the residents and the taxpayers,” Portner said. “I know going to court has a negative connotation, but we have these processes in place to resolve these disputes.”
Instead of canceling the contract for deed, the plaintiffs brought a lawsuit to compel the city to pay the $1.4 million.
Sherburne County District Court Judge Sheridan Hawley ruled Dec. 18, 2013, partially in favor of the city and partially in favor of the Krauses. Hawley denied summary judgement that would have compelled the city to perform its obligations under the purchase agreement, but ruled the city was subject to damages because of warranties.
The next step has been for the two sides to see if they can mediate a settlement, but if they can’t, then a Sept. 22 trial has been scheduled. A jury will figure out the damages, Portner said.
The city’s attorneys and Krause’s attorney were in court on Feb. 28 in a mediation session, but reportedly little progress was made. The two sides can continue to mediate, but without a resolution the matter will go to trial, with appeals likely to follow.